Human Capital Formation
Knowledge has played a significant role in the development of mankind. Education, learning, training can be gained and spread through various means like music, books, movies, lectures, etc. It has already been proved that the businesses initiated by the educated and skilled individuals are always productive than that started by the unskilled person. Therefore, the income earned by the skilled person is more than the unskilled person. Similarly, the contribution to the nation’s economy is more from the skilled person than from the latter.
Sources of Human Capital Formation
Education investment is recognised as one of the main sources of human capital, along with other sources like health, migration, on-job training, and information. Let’s decode it one by one.
Quick link: Impact of Human Capital on Economic Growth
Investment in Education
The most powerful way to improve and expand the fruitful workforce in the state is by nourishing and building up the education system. It is acknowledged as the root of human capital formation, that is the reason why the parents and also the government spend more on education. Few objectives why individual and state investment in education are.
- To developing their future income
- Build manpower and enhance their technical skills, to improve workers productivity and therefore resulting in economic growth
- To control the population growth rate by reducing the birth rate and making maximum resources available per person
- Knowledge and education can be transferred to others, resulting in social advantages.
Investment in Health
The second major source of human capital formation is the Health sector. A person who is unwell will absolutely influence productivity. Few health-related investments are, providing clean and safe drinking water and therapeutic medicines, etc.
An individual to get higher salaries, good jobs migrate from their native place to another place. In India, unemployment is the reason for rural-urban migration. Other skilled and qualified individuals like doctors, engineers, migrate from one country to another in search of better opportunity. In both, the situation migration involves transportation cost, cost of living in the migrated place. The increased incomes in the new place exceed the values of migration; therefore, investment in migration is another source of human capital formation.
To increase the labour productivity, many companies provide on-job training. This source of income is expensive, and companies bear huge expenses for providing on-job training. Example: in-house training, training under a skilled supervisor, and off-campus training.
Investment in Information- All the detailed information
Information associated with education, health can be achieved by spending money. For example, data concerning salaries are prepared for different markets.
Problems of Human Capital Formation
- Growth in Population: The rapid rise of the population can influence the grade of human capital formation, mostly in developing countries. It degrades the per capita availability of the present facility. A large population involves extra investments.
- Long Process: The method applied for human development is a long term process because skill enhancement requires extra time. Therefore, the process becomes very normally slow.
- Gender Inequality and High Regional Disparity: These two factors the human development skill
- Insufficient On-Job training: In the Agriculture sector, on-job training to handle advanced equipment are not provided to the worker.
- High Poverty Level: In India, a large portion of the population is below the poverty line. Therefore, they do not have easy access to primary health and education.
|Q.1-What are the determinants or sources of human capital formation?
What factors contribute to human capital formation? (NCERT)
|(1) Expenditure on education||
|(2) Expenditure on health||
|(5) Expenditure on Information||
|Important Topics in Economics:|
|Q.2- What are the problems of human capital formation in India?|
|ANSWER: Main problems of Human capital formation in India are:|
|(1) Rising Population||
|(2) High Regional and Gender Inequality||
|(3) Brain Drain||
|(4) High Poverty Level||
|Q.3- Mention two government organizations that regulate the health sector. (NCERT)|
|Regulatory Authority In Health||
|Q.4- Mention two government organizations that regulate the education sectors. (NCERT)|
|Regulatory Authority In Education||
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